Bounded Rationality and Industrial Organization

Ran Spiegler

The first theory-oriented textbook since Ariel Rubinstein's 1998 book Modeling Bounded Rationality

The first synthesis of market models with boundedly rational consumers, with potential implications for consumer protection policies

Analyzes a small set of simple yet rich models, mostly with complete and rigorous proofs

Provides an intellectual background for policy makers' thoughts regarding consumer protection, in analogy to the role that conventional industrial organization theory plays in anti-trust policies

The first proper graduate-level textbook treatment of the relevant theoretical developments in the last 10-15 years

Bounded Rationality and Industrial Organization

Ran Spiegler

Description

Conventional economic theory assumes that consumers are fully rational, that they have well-defined preferences and easily understand the market environment. Yet, in fact, consumers may have inconsistent, context-dependent preferences or simply not enough brain-power to evaluate and compare complicated products. Thus the standard model of consumer behavior-which depends on an ideal market in which consumers are boundlessly rational-is called into question. While behavioral economists have for some time confirmed and characterized these inconsistencies, the logical next step is to examine the implications they have in markets.

Grounded in key observations in consumer psychology, Bounded Rationality and Industrial Organization develops non-standard models
of Although the challenge of enriching the psychology of decision
makers in economic models has been at the frontier of theoretical research in the last decade, there has been no graduate-level, theory-oriented textbook to cover developments in the last 10-15 years. Thus, Bounded Rationality and Industrial Organization offers a welcome and crucial new understanding of market behavior-it challenges conventional wisdom in ways that are interesting and economically significant, and which in the end effect the well-being of all market participants.